Marwari Hotel vs The Commissioner of Income Tax

K.S. Paripoornan, C.J. and Naresh Kumar Sinha, J.—At the instance of the Assessee the Income Tax Appellate Tribunal, ''B'' Bench, Patna, has referred the following two questions of law for the decision of this Court u/s 256(1) of the Income Tax Act:

(1) Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the form No. 12 filed separately by the partners of the firm did not fulfil the terms of proviso to Sub-section (7) of Section 184 of the Income Tax Act, 1961?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the order passed by the Income Tax Officer on 25.9.72 refusing continuation of registration u/s 185(3) of the Income Tax Act, 1961, was not premature or illegal?

We heard counsel for the Petitioner-Assessee and also counsel for the Revenue. The question referred to this Court, and the facts relating thereto cover a wide range. It is unnecessary to traverse the entire grounds in the view that we take regarding the crucial order passed by the Income Tax Officer dated 25.9.72 u/s 185(3) of the Income Tax Act.

The minimal facts to answer the vital or crucial question in this case are as follows:

We are concerned in this case with the assessment year 1972-73. The Assessee was allowed registration upto the year 1971-72. For the year 1972- 73 it had time to file the returns u/s 139(1) of the Income Tax Act till 30.9.1972. It was granted time of file returns till 6.10.1972 by the Income Tax Officer u/s 139(2) of the Income Tax Act. It was open to the Assessee-firm to file the declaration u/s 184(7) Proviso Clause (ii) at any time before 6.10.1972 (time allowed u/s 139(2) of the Act). But the firm filed a declaration in Form 12 on 22.8.72. The firm had three partners namely Bihariji Mills Ltd., Gopi Krishna Kanodia and Banarshi Lal Kotriwal. The first Form 12 was filed on 22.8.1972 which was signed only by Banarshilal Kotriwal. The income Tax Officer is sued a letter on 23.8.1972 to the Assessee and stated that the declaration in Form (sic) was not in order and one month''s time (sic) given for removing the defects. It is (sic) from the statement of the case at paragraph 5 which is also borne out from the order the Appellate Tribunal (the Income Tax Appellate Tribunal) dated 21.7.1972, (paragraph 7) that the Assessee filed a (sic) on 22.9.. 1972 to the effect that Gopi Krisana Kannodia was not available because of ill - health and so time should be granted By order dated 25.9.1972 the Income Tax Officer held that the defects were not removed, so the registration granted to the firm in the year 1971-72 would not continue. This affected the assessment of the firm for the year 1972-73. The assessed filed an appeal against the said assessment order. It was affirmed by the first Appellant Authority and confirmed in Second Appeal by the Tribunal.

As stated earlier, many questions (sic) merits were raised before us. We find that the order passed by the Income Tax Officer dated 25.9.1972 declining to continue the registration of the firm in exercise of the power vested is him u/s 185(3) of the Act suffers from a fundamental infirmity. The order passed by the Income Tax Officer dated 25.9.1972 is document No. 1. It is an order passed u/s 185(3) of the Income Tax Act, Indeed the order had been passed, in conformity with the (sic) order passed by the Income Tax Officer dated 23.8.1972. The officer gave one month''s time to remove the defects. It was not done. Normally the Income Tax Officer could have proceeded to consider and dispose of the Form 12 filed before him but the Assessee had filed a petition on 22.9.1972 praying for time This application docs not seem to have been considered in the order passed by the Income Tax Officer dated 25.9.1972 declining to accept the Form No. 12 filed by the Assessee. We are of the view that in passing the order date 25.9.1972 the Income Tax Officer committed a fundamental illegality. He ignored the petition (sic) by The Assessee dated 22.9.1972. He (sic) have at least considered the said petition before passing the order dated 25.9.1972. (sic) had committed a fundamental illegality as (sic) result which the order dated 25.9.1972 cannot be sustained. It is by the said order (sic) the Income Tax Officer declined to continue the registration u/s 185(3) of the Act. We therefore, hold that the Income Tax Officer had ignored and failed to consider the petition filed by the Assessee on 22.9.1972 and proceeded to pass the order dated 25.9.1972 it was, thus, illegal. We therefore, answer second part of question No. 2 in the negative (sic) favour of the Assessee and against the Revenue. We further hold that the order passed by the Income Tax Officer on 25.9.1972 (sic) continuation of the registration of the (sic) u/s 185(3) of the Income Tax Act was illegal.

The above answer covers the later limb of second question which is fundamental. Therefore it is unnecessary to consider the (sic) limb of question No. 2 and also question (sic). We decline to answer question No. 1 referred to this Court. It is merely academic to answer said question. We decline to answer question No. 1, since we have held that the order of the Income Tax Officer dated 25.9.1972 is illegal.

A copy of this judgment shall be sent to the Income Tax Appellate Tribunal, ''B'' Bench Patna, by the Registrar under his signature and the seal of the Court.